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Shell snags N.S. offshore oil exploration deal

The Canadian Press

Royal Dutch Shell PLC is plunging into the deep waters off Nova Scotia, winning a bid for four exploration blocks that promises $970-million in exploration spending over the next six years.

Shell's commitment to explore off the continental shelf some 250 kilometres southeast of Halifax is a major boost to Nova Scotia's struggling energy sector, which has struck out in the hunt for oil and expects its natural gas production to decline precipitously within 10 years without a new discovery.

The Canada-Nova Scotia Offshore Petroleum Board announced the winning bid on Friday, after working with the provincial government in an aggressive international campaign to attract investors. The province has invested $15-million to prepare an atlas of its offshore while the board ensures that seismic and other data are easily and remotely available to companies interested in sizing up opportunities.

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"This is an important milestone in the province's plan to reinvigorate interest in Nova Scotia's offshore," Premier Darrell Dexter said in a release. He said it will give a significant boost to the province's offshore supply sector.

But it will likely take a significant discovery of oil or gas – particularly oil – to draw further, serious interest from the international industry.

Shell has a long history in the Nova Scotia offshore, and is part of the Exxon Mobil Corp.-led consortium that is producing gas, about 270 million cubic feet per day, off Sable Island. Encana Corp.'s Deep Panuke is due to begin producing early this year, at a rate of about 200 million cubic feet per day.

But those two fields will be in steep decline by the latter part of this decade without additional finds.

Shell said it views the new lease as "an important entry into an attractive new, deepwater basin offshore Nova Scotia."

The company expects to conduct major seismic work in the blocks in 2013 and hopes to drill its first exploration well the following year, subject to availability of rigs and crews, spokesman Stephen Doolan said.

He said it is too early to know whether the company expects to find oil or gas. Clearly, it would hope to strike oil, which is more valuable than gas and easier to transport to market from 250 kilometres offshore.

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Stuart Pinks, chief executive officer of the Canada-Nova Scotia board, said the region appears prospective for either natural gas or oil. Shell's $970-million commitment is a record for the Atlantic Canadian offshore, including Newfoundland and Labrador, though the amount is spread over four parcels.

The blocks sit at depths ranging from 1,400 metres to 3,700 metres. (By way of comparison, Chevron Corp.'s Orphan Basin well drilled in 2009 was in 2,600 metres of water, which is a record in the Canadian offshore.)

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